Correlation Between EXP and Litecoin
Can any of the company-specific risk be diversified away by investing in both EXP and Litecoin at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining EXP and Litecoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EXP and Litecoin, you can compare the effects of market volatilities on EXP and Litecoin and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in EXP with a short position of Litecoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of EXP and Litecoin.
Diversification Opportunities for EXP and Litecoin
Poor diversification
The 3 months correlation between EXP and Litecoin is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding EXP and Litecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litecoin and EXP is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on EXP are associated (or correlated) with Litecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litecoin has no effect on the direction of EXP i.e., EXP and Litecoin go up and down completely randomly.
Pair Corralation between EXP and Litecoin
Assuming the 90 days trading horizon EXP is expected to generate 1.51 times less return on investment than Litecoin. But when comparing it to its historical volatility, EXP is 3.49 times less risky than Litecoin. It trades about 0.1 of its potential returns per unit of risk. Litecoin is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 10,225 in Litecoin on November 9, 2024 and sell it today you would earn a total of 173.00 from holding Litecoin or generate 1.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EXP vs. Litecoin
Performance |
| Timeline |
| EXP |
| Litecoin |
EXP and Litecoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EXP and Litecoin
The main advantage of trading using opposite EXP and Litecoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EXP position performs unexpectedly, Litecoin can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Litecoin will offset losses from the drop in Litecoin's long position.The idea behind EXP and Litecoin pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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